Think Singapore is a “low-tax” haven? Think again

August 8, 2011

In this recent video, David Cay Johnston examines the notion, often heard from U.S. politicians, that Singapore is a model of low taxation:


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“I have been in Singapore for a week”

You have no idea how this country works. I have lived here for over a year and it is an incredibly low tax country.

A toyota is 100,000SGD. The current cost of a Certificate of Entitlement (C.O.E) is ca 60,000 SGD. What you don’t mention is that there is a hard limit on the number of cars in Singapore to help deal with pollution and congestion. Singapore is a miniscule red dot. I have walked from one end of the country to the other in less than a day, and I regularly bike North-South for work. The Bus and MRT system is designed perfectly that you never need a car to get anywhere on the island, and the few times you do you can call a cab. You don’t look like the active type so I guess I can see why you missed this point. The US would never have laws like this because the US has enough room for people to own cars without causing permanent gridlock.

The ERP toll is varied and it is ONLY for city traffic and ONLY during certain hours. If you take local roads to work in the morning there is no tax, and if you get into the CBD before 700 there is no ERP at all. In the evenings, weekends, and public holidays there is no ERP.

There are rules regarding housing speculation because the majority of Singaporeans live in HDB flats. These flats are subsidized by the government and sold ONLY to citizens. After a period of time the citizens are allowed to sell ONLY to other citizens or Permanent Residents. When the flat changes hands, there is a minimum period reset before you can sell again. These rules exist to ensure those living in Singapore long term aren’t made homeless by expats trying to make a buck. If you want to speculate you can pop 1,000,000SGD+ and buy a condo which you can do anything with.

The flat fact I can tell you is tax wise there are 3 things required to pay. GST (Sales tax) 7% and only levied by businesses doing 1,000,000SGD turnover yearly. CPF(Central Provision Fund) which is a mandatory retirement/medicine savings account for PR and Citizens which is funded by employee, employer, and managed by the govt. You are allowed to use this fund to buy houses, invest in gold, or as a managed stock portfolio. Finally there is income tax which is a joke. spx?id=119
To put in in perspective, the US I would pay around 45,000 USD in taxes and spend a long time filing. In Singapore I pay around 8,000$ per year and filing is simply one easy form.

Sure there are a lot of government owned entities here, but to suggest all of the local stores are owned by the government is false and absurd. The government has its hands in a lot of places but the market is very alive and free. If you left the CBD and the expat bubble and actually came out to the heartlands you would understand this.

What you really should ask is: Do you want to live in a country where everybody can afford high quality medical care?(ER is flat 90SGD at all the hospitals) Or do you want to live in a country where you can actually see your pension fund and use it to better your life instead of paying into an unfunded black hole? Or possibly ask do you want to live in a country which has excellent education available for all residents? Because those are more relevant questions compared to the crap you spewed.

Posted by djlowballer | Report as abusive

Singapore low tax is just a myth. In reality Singapore might be the highest countries with hidden tax. Singapore gov source of income:
1. When you buy car you pay 120% PARV out of car price plus COE to government which varies around 80%-100% of original import price. This is hidden tax. That means with 10 years loan this amount will be equall to almost 20% your income.
2. Every citizen must have compulsory saving (CPF) 20% out of their gross income plus 15% extra must be paid by company. This is another hidden tax, because most of citizen can’t take out their CPF account after retirement because of increasingly high minimum withdrawal limit.
3. Citizen have no choice to buy property from government HDB. All the public property are own by HDB government and the price is controlled by government. Here no body knows how the price of housing are inflated, some estimate that told that the $300K-$400K house only required $30K-40K construction cost. The HDB never disclose their financial reports. So you can calculate how much government profit from this business only. Beside many other tax and fine, stamp duty 17% out of house sale etc.
4. Business in Singapore are reportedly taxed at 20% of profit, and cut down further. However the other hidden cost that many underestimate is the capital and operational cost such as rent cost, labor cost are extremely high as compared to surrounding countries like Jakarta/Kuala Lumpur. Since many property are belong to government, this money actually goes to gov account as well.
5. Singapore has lots of foreign reserve $240B and saving reserve from CPF estimated around $180B that is invested by 2 gov investment agency Temasek and GIC. No one knows how many billions have been lost in the investment. In 2009 alone estimated Temasek lost their 20% asset and GIC lost 30% asset.

Posted by Zuijiadeai | Report as abusive

I live in a somewhat isolated area in the USA where my internet access is usually adequate but sometimes slow. In particular, Reuters blogs load very slowly, and I can’t play the video — although I generally have no problem downloading or viewing YouTube or Vimeo. Also, my learning preference is for reading. Finally, toward full disclosure, I am a great fan of David Cay Johnston. So, in conclusion, before responding to comment posted above, I hope that Reuters will publish the transcription of the video.

Having said that, my take on djlowballer’s comment is that Singapore appears to be a country with national policies that here in the U.S. would be thought of by U.S. Republicans (‘conservatives’ or ‘corporatists’) and related U.S. mass media sources as flat-out socialism, amounting to Communism. That is, if such policies would be suggested for the USA, they would be attacked — or more likely ignored — as socialistic and leading to economic disaster. Any political move in this country (USA) to adopt an overall approach bearing any similarity to that described by ‘djlowballer’ would be quickly shot down by U.S. corporate media and/or (assuming it would get into Congress at all) buried in committee never to be seen or heard again.

There seems to be some kind of communication gap between Johnstone and his Singaporean critic. Maybe djlowballer takes Johnston as claiming that Singapore is an unhappy place for Singaporeans to live and work, and I doubt that Johnston was even addressing that matter. Our (USA) interest in Singapore is entirely in the role that Singapore plays in our (USA) economic/taxation/trade system (plus maybe a slight importance on the security side from the Navy point of view). Generally, considering global financial/security issues, the USA probably sees Singapore as in a balance between neutrality and effective alliance with Beijing.

Without much specific knowledge, Americans mostly assume that Singaporeans are happy and productive people. We make the same assumption about Malaysia — but not about any other nations in that region. Information posted by djlowballer is interesting and noted.

Maybe Johnston visiting Singapore never “left the expat bubble and came out to the heartlands” or maybe Johnston is speaking exactly from the point of view of the expat bubble, because Johnston’s audience is probably 90% us plain old American types who wouldn’t know the CBD from Mindanao. If any of us would move to Singapore, we’d be trapped in the expat bubble for sure … and that’s why we stay where we are in our own heartland, constantly preparing, except when we are off practicing, to fight off the foreign devils that we know are coming after us. :-)

Posted by BornInUSA | Report as abusive

I earlier wrote a comment saying I would have liked to see the transcript of the video. It’s well that my comment hasn’t been published, because I have found the text article at SG Alternative News, publishing the story from Reuters – nt/article/76-tsr-whiners/135323-singapo re-tax-myths–david-cay-johnston

Very good. Now I can try to understand the comment by djlowballer, which accuses Johnston of knowing nothing about Singapore, although djlowballer never really argues Johnston’s key point that if you “add the obvious taxes to the implicit ones”, “you get a high tax society, especially for affluent wage-earners with no capital income.”

First, Johnston’s article – as is obvious from the first paragraph – isn’t directed at Singaporeans but at Americans.

Second, Johnston’s main point – “implicit taxes” in a corporate socialist state – seems to me to be reinforced by djlowballer’s comments! It isn’t that djlowballer finds Johnston to be inaccurate; it’s that djlowballer finds various specific implicit taxes (e.g., Certificate of Entitlement for a car) to be justifiable. Really, djlowballer hardly challenges Johnston’s remarks that Singapore is (1) an example of a “corporate socialist state” and (2) not an example of a “low tax = small government” country at all.

Here’s djlowballer: “Sure there are a lot of government owned entities here, but to suggest all of the local stores are owned by the government is false and absurd.” That’s an example of djlowballer’s questionable rhetorical style: Johnston never suggests that all local stores are owned by the government! And I am convinced that there are “a lot of government owned entities” in Singapore.

It comes down to that djlowballer is a Singapore booster. Every city has those, and certainly Singapore deserves them too.

Johnston’s point isn’t that the “implicit taxes” cannot be justified as supporting the happiness of Singaporeans as it is that the Singaporean system isn’t at all compatible with dogmatic politico-economic positions of the Cato Institute or of the Heritage Foundation. Rather than what Singaporeans think about living in a Singaporean system, Johnston addresses the question of whether we Americans would like it and whether we should rely on a politicized representation of Singapore as proof, without real evidence, of a dogma that low taxes invariably produce a prosperous and happy country. (I believe that there were NO income taxes in the former Soviet Union!)

My opinion is that something that works well in the small and unique nation of Singapore may not work at all in the comparatively huge and heterogenous USA — at least, there is no reason to suppose so based on any simplistic argument.

Johnston and djlowballer are talking apples and oranges. Maybe a better analogy would be like this:

Johnston is discussing talk in the US of how great Singapore’s apples are, and, Johnston points out that, actually, there are no apples growing in Singapore.

To which, djlowballer responds, “On the contrary, Singapore’s oranges are great!”

An unrealistic and utopian vision of Singapore, Johnston suggests, is promoted in the USA by “conservatives” or “libertarians” or “corporatists” to justify their political agendas (which currently have resulted in the S&P downgrade of US Treasury certificates from the previously unchallenged AAA rating). Johnston questions whether the utopian vision promoted by arrogant political factions within the USA can be taken at its face value, or not.

(“Conservatives” or “libertarians” or “corporatists” are my terms — Johnston just points to them by way of the Cato Institute and the Heritage Foundation.)

Here’s Johnston’s concluding question, clearly addressed to his American audience:

“So the next time you hear Capitol Hill regulars telling you that Singapore is the way to go, ask yourself if you like the idea of government as omnipresent investor. Ask yourself about how much you like the idea of implicit taxes like those that feed the Singapore government.”

In response, djlowballer would ask:

“Do you want to live in a country where everybody can afford high quality medical care? (ER is flat 90SGD at all the hospitals) Or do you want to live in a country where you can actually see your pension fund and use it to better your life instead of paying into an unfunded black hole? Or possibly ask do you want to live in a country which has excellent education available for all residents?”

It’s unfortunate that djlowballer ends with “Because those are more relevant questions compared to the crap you [Johnston] spewed.” Well, what can we expect of boosters when reacting to critics of their beloved city?

Both Johnston and djlowballer are asking loaded questions, but both also provide interesting information.

Posted by BornInUSA | Report as abusive

Just to clarify on COE – right now it is at a record high – if you bought a car in January 2 years ago, COE for 1600cc and above was less than $S1000. So I’m not sure where the ‘average’ comes from in the comment above – average over last 12 to 24 months? We bought ours in august 2 years ago for 16,000 – total cost for on the road Toyota wish was S$80,000 – like all things cyclic, it will come down again. I’m a PR (expat) and we also own our own HDB apartment… 2 years ago the resale was valued at S$400,000 now if we wanted, could sell for 500,000. CPF is a wonderful medium and I love how little tax I pay – been here 6 years and am speaking from experience! Cheers, Aussie pete :

Posted by Anonymous | Report as abusive

Singapore is the place I want to live but can’t. Taxes are low on almost everything except cars. But at least in Singapore you can see how your tax money is spent. Everything is clean and works as it should. What else can you ask for? True, not everyone is rich. On the other hand of course it is easier to manage a small country like Singapore than a large one like the US.

Posted by DavePhil | Report as abusive